Quickest synopsis I can produce: I started an Internet marketing company 2 years ago. Originally did websites and social media, eventually went to just social media with success. I have 3 people working with me at this point (2 salesman on strictly commission, 1 partner with a small stake) and we've went from 6 to 11 contracted social clients in the past 90 days -- in other words, some signs of growth (not to mention the quality and size/budget of our clients is improving too). All though we still are a smaller operation as we are on track for only about 30k in sales for this year at conservative projections. We have no capital so we're very restricted financially which makes faster growth tougher. Recently I was approached by one someone (a client I did work for actually) who owns a large flower shop and flower distribution business and is also tied in with a local television station in my city. He told me he is impressed with me and what we have going and he wants to team up. He is willing to finance an office (we've been working out of my home office which certainly can't last forever) and add a few more employees in various areas. He wants to be hands on to grow the business, not so much just an outside investor. He also wants to begin offering video production in addition to the Internet marketing services as part of this company. He wants to basically hit the reset button and rebrand from the beginning but now offering a larger array of marketing services. He wants to split the company 60/40. 60 to him. This is my dilemma. I'm very excited to partner with someone who's more experienced than me and also well connected in the area which will bode well, but am I discounting what I've built? I do feel we could continue being successful without him, but I also feel the financial backing is appealing in that it's extremely difficult to set yourself up for large amounts of growth with limited capital so it would be nice. Lastly, I'm giving up the controlling stake. My dream has always been to be at the forefront of my own company, but with this arrangement I essentially fall to second in command. Am I on an ego trip to be questioning if I'm okay with that? I keep going back to the saying, it's better to have 1% of something huge than 100% of something small.... My gut tells me I can't pass up partnering with this business man and this opportunity, but I don't want to get taken advantage of either... Any and all help is extremely appreciated. Thank you so much in advance!
Hey,
A few points (and as someone who has sold a digital agency, I have some experience here)
1) "This is the biggest decision of my life"...
No it isn't. Not even close. I mean no disrespect but, agencies are easy to start back up. You build a team, build a client base, maybe take investors, scale it, sell it. Sit on your hands for the non-compete period, then start another one. Don;t sweat this too much, you aren't facing a decision that you can't work your way out of in a year or two.
So my tip number one: relax!
2) This investor is taking you for a ride
Giving yourself a minority ownership in an early-stage company or startup is a very, very bad idea. You need to feel like you have a "big win" ahead of you. A CEO shouldn't own a minority stake in the company she or he founded until you're doing $Millions in revenue
3) This guy is bringing very little to the table
He has no background in your area. If he's bringin money, sure. On £30k run rate you aren't hugely investible but hey, a £20k injection of cash at 20% equity might work for you. But seriously, right now you have a very early stage business and it's too early to see how his flower shop expertise would help.
4) It's really, really early for you
Taking investments into agencies is usually a bad idea until you have some solid revenue. £30k is very admirable and you should be proud to be more successful than a LOT of small business owners. But honestly, just keep selling and hustling.
Hire SLOW and fire fast. Move your sales reps to a basic and give them quotas. Use contractors to scale out delivery without taking on as much risk.
It sounds like you have the beginnings of a great agency. but from the information you've provided and from remembering my very early days where I transition from freelancer to agency, an investor right now would be a bad move for you.
Happy to jump on a call to discuss my specific experiences and how I scaled out my team and client base and then moved everything to SWEET retainers so we could sell the biz.
Answered 10 years ago
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